Risk Management (continued)
Main risks
Regulatory changes
related to alcohol
Economic and
political environment
Distribution
channel transformation
O Q,
Introductio^^^^^^^^^^H Report of the Executive Board^^^^^l Report of the Supervisory Board
The following risk overview highlights the main
risks that could hinder HEINEKEN in achieving its
strategy and business objectives. We recognise that
this is not a full overview of all risks and uncertainties
that may affect the Company. As new risks emerge
and existing immaterial risks evolve, timely discovery
and accurate evaluation of risks are at the core of
HEINEKEN's risk management system.
The financial risks are reported separately in note
11.5 to the Financial Statements on page 99.
The Statement of the Executive Board is included
in the Corporate Governance Statement 45.
The way we manage our Business Conduct and
Human Rights risks are further detailed out in the
Sustainability Review section of our annual report
on pages 119-154.
What could happen
The topic of alcohol and health is under scrutiny
in many markets. This may prompt regulators
to take further measures limiting HEINEKEN's
freedom to operate, such as restrictions or bans
on advertising and marketing, sponsorship,
availability of products, and increased taxes and
duties or the imposition of minimum unit pricing.
These could lead to lower overall consumption
or to consumers switching to different
product categories.
Recent developments
Restrictive measures on alcohol consumption
and sales continue to be taken by governments
across all four regions. Continued focus by WHO,
OECD, UN and the EU on alcohol as part of the
Non-Communicable Disease agenda could lead
to additional restrictions which would impact
HEINEKEN's business across multiple geographies.
What we are doing to manage this risk
Responsible consumption is one of the priorities of
HEINEKEN's Brewing a Better World sustainability
programme. Using the power and reach of its
brands, HEINEKEN strives to make responsible
consumption aspirational and works closely
with local governments, NGOs and specialists to
prevent and reduce harm caused by abuses such as
underage drinking or drinking and driving. We are
expanding consumer choice by providing low- and
no-alcohol brands.
Explore Further:
- Advocating responsible consumption, pages 120, 134-137.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2018
Other Information
What could happen
Throughout the world, local or regional economic
and political uncertainties could impact our
business and that of our customers. In particular,
the risk of an economic recession, change of
laws, trade restrictions, inflation, fluctuations in
exchange rates, devaluation, nationalisation,
financial crisis, or social unrest could adversely
affect our revenues and profits.
What could happen
In order to maintain position and profitability,
our customers are consolidating, either through
acquisition or through buying alliances.
This concentrates increased buying power into
fewer hands. Next to this, digital disruption is
creating new routes to consumers, increasing
the value and power of owning customer and
consumer data.
Recent developments
Political risk has expanded beyond emerging
markets to become a permanent element of the
economic landscape. The changed US attitude
towards international free trade and Brexit have
created significant uncertainties. Agility has
become a priority to enable businesses to navigate
subsequent changes in laws, currency movements,
import restrictions, scarcity of hard currencies,
commodity pricing and their impact on the
Company's profit.
What we are doing to manage this risk
HEINEKEN has set up various tools to limit the
impact of such events on its business such as
supplier management, short-term liquidity
management, tight foreign exchange monitoring,
prudent balance sheet measures, and scenario
planning. We have monitoring mechanisms in place
globally and locally, to allow us to monitor, report
and engage proactively on political risks. For events
which could threaten the continuity of the business,
contingency plans are in place.
Recent developments
New buying alliances are being negotiated, and
cross border acquisitions continue. The major on-line
retailers are moving to an omni-channel strategy,
owning on-and-offline retail. The race to bring voice
assistants into every home is on. Electronic point of
sales systems are increasingly used to collect and
leverage customer and consumer data.
What are we doing to manage this risk
HEINEKEN will continue to invest strongly in building
brands, and the importance of strong brands only
increases in the face of retail disruption. We are also
implementing a comprehensive set of commercial
digital initiatives to strengthen our connection
with consumers and customers, and ownership
of key data. Lastly, we are investing in capabilities
for servicing sophisticated and increasingly
digital customers.
Explore Further:
- Deliver top line growth, pages 9-15.